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INDIRECT TAX
Indian Budget 2010-11- Full Text- February 26, 2010
Medical Sector
164. Medical equipment, instruments and appliances are subjected to a very complex import duty regime based on several long lists that describe individual items. Multiple rates coupled with descriptions not aligned with tariff lines, result in disputes and at times prevent state-of-art equipment from getting the benefit of exemption. I propose to prescribe a uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty on all medical equipment. A concessional basic duty of 5 per cent is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty. Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. is being retained. The concession available to Government hospitals or hospitals set up under a statute is also being retained.
165. The manufacturers of orthopaedic implants have represented that their inputs attract a higher rate of duty than the finished product. I propose to exempt specified inputs for the manufacture of such implants from import duty.
Infotainment
166. India is a nation of movie-goers. The film industry has been experiencing difficulties in importing digital masters of films for duplication or distribution loaded on electronic medium vis-a-vis those imported on cinematographic film, owing to a differential customs duty structure. I propose to rationalise this by charging customs duty only on the value of the carrier medium. The same dispensation would apply to music and gaming software imported for duplication. In keeping with the tradition of Indian cinema, however, I shall provide a surprise ending. In all such cases the value representing the transfer of intellectual rights would be subjected to service tax.
167. Cable transmission of infotainment is undergoing a transformation with the adoption of digital technology. The multi-service operators need to invest in "Digital Head End" equipment. To enable this, I propose to provide project import status at a concessional customs duty of 5 per cent with full exemption from special additional duty to the initial setting up of such projects.
Precious Metals
168. The prices of precious metals continue to rise. Since the customs duty is levied on these at specific rates, I propose to index the rates as follows:
• On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams.
• On silver from Rs.1,000 per kg to Rs.1,500 per kg.
169. Gems and jewellery is a traditional item in our export basket. Rhodium - a precious metal used for polishing jewellery attracts a basic customs duty of 10 per cent. This is being reduced to 2 per cent.
170. To encourage domestic refining capacity for gold, I propose to reduce the basic customs duty on gold ore and concentrates from 2 per cent ad valorem to a specific duty of Rs.140 per 10 grams of gold content with full exemption from special additional duty. Further, the excise duty on refined gold made from such ore or concentrate is being reduced from 8 per cent to a specific duty of Rs.280 per 10 grams.
Other Proposals
171. Full exemption from import duty is available to specified inputs or raw materials required for the manufacture of sports goods which are assuming importance as an item of export. This is being expanded to cover a few more items.
172. In order to incentivise the domestic production of microwave ovens, I propose to reduce the basic customs duty on one of its key components, namely magnetrons from 10 per cent to 5 per cent.
173. Presently, there is a value limit of Rs.1 lakh per annum on duty-free import of commercial samples as personal baggage. I propose to enhance this limit to Rs.3 lakh per annum.
174. Industry has represented that the exemption from special additional duty of 4 per cent based on refunds leads to substantial blockage of funds. To ease this difficulty, I propose to provide an outright exemption from special additional duty to goods imported in a pre-packaged form for retail sale. This would also cover mobile phones, watches and ready-made garments even when they are not imported in pre-packaged form. The refund-based exemption is also being retained for cases not covered by the new dispensation.
175. Toy balloons are a source of joy to millions of children. To bring a smile to their mothers' faces, I propose to fully exempt them from Central Excise duty.
176. Some of the other relief measures that I propose are as under:
• Reduction in basic customs duty on long pepper from 70 per cent to 30 per cent;
• Reduction in basic customs duty on asafoetida from 30 per cent to 20 per cent;
• Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4 per cent;
• Reduction in central excise duty on corrugated boxes and cartons from 8 per cent to 4 per cent;
• Reduction in central excise duty on latex rubber thread from 8 per cent to 4 per cent; and
• Reduction in excise duty on goods covered under the Medicinal and Toilet Preparations Act from 16 per cent to 10 per cent.
177. My proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs.43,500 crore for the year.
Service Tax
178. The service sector contributes nearly 60 per cent of the GDP. The service tax to GDP ratio however, is only around 1 per cent. This sector thus, has significant potential to augment revenue.
179. To bridge this gap, I had the option to raise the rate of service tax to 12 per cent as it was before I introduced the third stimulus package. I am not resorting to this option to maintain the growth momentum and also to bring about a convergence in the rates of tax on goods and services. I, therefore, propose to retain the rate of tax on services at 10 per cent to pave the way forward for GST.
180. I had another option - to bring all services under service tax. I am not opting for this either at this stage. I propose, however, to bring certain services, hitherto untaxed, within the purview of the service tax levy. These are being notified separately.
181. I am also proposing certain legislative changes to plug revenue leakages, to remove distortions and to clarify certain doubts that have arisen over a period of time. I do not want to waste the precious time of the House elaborating the details, as they are available in the Finance Bill and other Budget documents.
182. Export of services, especially in the area of Information Technology and Business Process Outsourcing, generates substantial employment and brings in foreign exchange. I propose to ease the process of refund of accumulated credit to exporters of services by making necessary changes in the definition of export of services and procedures.
183. Accredited news agencies which provide news feed online attract service tax. Acknowledging the yeoman services of such news agencies in disseminating news, I propose to exempt such news agencies that meet certain criteria, from service tax.
184. My proposals relating to service tax are estimated to result in a net revenue gain of Rs.3,000 crore for the year.
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